Exports of textile and garment industry has many advantages in 2016

There are 6000 companies currently in textile and garment industry, attracting around 450,000 employees, both directly and indirectly. The industry is said to enjoy many benefits of Korean exports when the free trade agreement Vietnam – Korea (VKFTA) takes effect.

It is expected that, in 2016, South Korea will reduce tariffs to 0% for import garments from Vietnam. However, how many of the total 6,000 companies active in the textile industry actually benefit from VKFTA?

TNG Investment and Trading Joint Stock Company (TNG) is a major exporter, located in Thai Nguyen province, with the system of 17 garment factorys, export revenue stood top of this province (about USD 70 million in 2014), but the proportion of exports to South Korea is very low compared with the traditional markets of the business.

Mr. Nguyen Van Thoi, chairman of the TNG Management Board, said that company traded exports to South Korea, but it is insignificant in comparison with the US, EU and Japan. Therefore, VKFTA has been signed, that is a good news to the textile industry, is the motivation for export due to tax reduction, but TNG wil not get many benefits because the South Korea export market is not an important point.

Another enterprise, DONG PHONG CO.,LTD (Thai Binh Province) said, at this time, the company did not export to South Korea, but in the strategy to expand the market and opening opportunities, the company will invest to promote exports to this market.

With more than 200 corporate members, Association of Garment-Textile-Embroidery-Knitting in HCM City also shared that, the number of enterprises which has commercial transactions, exports of goods to South Korea is too small. Mr. Bui Trong Nguyen, General Secretary of the Association said, the South Korean market is relatively strong in fashion, most businesses supplying garments to the market are in the supply chain of this country.

Therefore, currently, garment exports from Vietnam to Korea are mainly from the Korean businesses investing in Vietnam and these parts will benefits the most in markets, tax policy when VKFTA is singed.

General Director of Garmex Saigon, Mr.Nguyen An also said that in comparison with the market as the US, EU, South Korea is a relatively small export market for garments of Vietnam. South Korean enterprises mainly placed low orders for garments, about 2,000 -5000 products.

It is completely accurate to comment on the opportunity to increase exports of textiles as the tariff lines is reduced to 0% when VKFTA takes effect is. But, looking at the number of businesses that exported to South Korea, clearly, the advantages is tilted strongly toward Korean textile firms having investments, production in Vietnam. Vietnam enterprises have textile exports to South Korea, but the actual contribution to the total turnover of nearly USD 2.4 billion in 2014 is quite limited.

Mr. Nguyen Van Thoi said that most South Korean textile firms investing in Vietnam have large scale, from a few thousands to tens of thousands of workers, which have great advantages to get orders from South Korea parent company.